WORKPLACE RELATIONS: No more hurdles for Howard's dismissal laws

by Colin Teese

News Weekly, July 16, 2005

Neither John Howard nor Kim Beazley seems to have grasped the inadequacies of the Coalition's impending workplace relations legislation, argues Colin Teese, former deputy secretary of the Department of Trade.

Mr John Howard's Coalition government takes numerical control of the Senate from the week beginning July 4. Henceforth, the Coalition needs no support from outside parties to pursue its legislative program. That, however, does not mean the automatic passage of anything Cabinet decides to endorse.

Although the Labor Opposition, with or without the support of minor parties is now powerless, the Coalition backbench may not be. We have already seen that independent Liberals have the power to take on the Prime Minister and win. No doubt that will be done again.

It is, however, unlikely that any backbench revolt will stand in the way of the passage of the Government's changes to industrial relations policy which, it will be recalled, will liberate businesses with fewer than 100 workers from the more stringent employee dismissal laws otherwise attaching to employers.

Emasculating trade unions

News Weekly readers who follow these issues will be aware that this is one of the Prime Minister's most deep-rooted political objectives. Joined at the hip to the idea of emasculating the trade unions, it goes back to Mr Howard's grassroots associations with the Liberal Party. It has always been, and continues to be, among the most deeply felt instincts of the party at the local branch level.

It is no secret that political parties' branches - the Liberal Party not excepted - rarely generate helpful policy ideas; and it has always been among the duties of the parliamentary leader to keep some of the sillier ideas of the branches off the political agenda.

Labor has never been very good at this; mainly because its crazies tend to have the power to feed their ideas into the federal conference, where, not infrequently, they are translated into binding policy.

Traditionally, the Liberals have been much cleverer - mainly thanks to the genius of its founder, Robert Gordon Menzies. He managed to set up the party so that the branches could have their say at state conferences, but that the parliamentary party did not necessarily have to be bound by anything those conferences decided.

Why is all of this relevant? Because Mr Howard's policy of more permissive dismissal provisions is an issue which seems to be "branch-driven". And, more importantly still - on reflection - it would seem to suggest that the Prime Minister, or his advisors, are not truly across the industrial relations issue. Not that the Leader of the Opposition, or his minders, are any better informed.

The course the Government is proposing on dismissal laws is unsound policy. Neither the reasons advanced in support of it by the Government, nor in Mr Beazley's opposition, seem to make much sense.

Certainly, it is unlikely to help those it is supposed to assist (i.e., small business). Nor is it likely to harm those Mr Beazley would like us to believe it is his purpose to protect (i.e., low-paid, vulnerable workers.)

The point is that neither the Prime Minister nor Mr Beazley seems able to have grasped the nature of the current labour market, notwithstanding that both have played such a large part in its transformation.

But perhaps they may be forgiven. The labour market is also comprehensively misunderstood by labour economists who seem so determined to misread the signals.

For example, we keep being told that the employment position is better than at any time in the last 30 years. The fact is, because we no longer compute unemployment by the same method as 30 years ago, accurate comparisons are impossible.

We can make a guess. Trying to compare like with like, we could estimate current unemployment calculated on the same basis as in 1970 as somewhere between 12 and 20 per cent. The official figure is about 5 per cent. Not much to boast about.

The second fundamental change in the labour market is the basis of wage-fixing. In the days before deregulation of the labour market, which was engineered by Hawke and Keating, something called "wage relativity" was maintained. Under the award arrangement, managed by the Industrial Relations Commission, wage increases awarded in one industry "flowed on" to others. None of this any longer applies.

What replaced it was supposed to create "greater flexibility" in wage-rate movements, but it seems to have failed - at least in that objective. Wages seem to be moving upwards in much the same as they always have - except that the rates of wage increase, sector by sector, are unrelated, and we now have more unemployed.

The third element of change affecting the labour market is perhaps the most important of all. And that followed in the wake of the de-industrialisation of our economy which accompanied so-called trade liberalisation. The tariff-cutting programs of Whitlam, intensified by Hawke and Keating, and continued by the succeeding Howard governments, are the reason why we have the lowest ratio of industrial production to GDP among the OECD countries.

If a proper assessment of the present circumstances is made, we will discover that in place of a single labour market, there are now a number. And, although wage rates within them are all rising, the rates of increases are independently determined.

A significant part of the market, comprising notably those workers previously employed in limited skilled occupations in manufacturing, appear to have disappeared altogether. Many of them have joined the ranks of the long-term unemployed, however we may choose to classify them when we calculate our total unemployment numbers. And those still in employment are mostly self-employed in various service industries, such as lawn-mowing, or are engaged, either full or part-time, in such sectors as the hospitality industry at low wages.

Imaginary workers

Yet, amazingly, these imaginary workers - as it seems appropriate to call them - appear to be the target of the Prime Minister's new dismissal policies. And, stranger still, this same imaginary group are the workers Mr Beazley believes he is obliged to protect.

What Mr Beazley, in particular, seems not to understand is that the workers he is hoping to galvanise into action against Mr Howard are either unemployed or self-employed.

Part of this latter group includes workers who might once have been called traditional Labor supporters. They are employed in the building industry and the industries which are associated with it.

This is the most overheated sector in the economy which is paying the highest wages and generating most of the unwanted wage-push inflation. The reason is the housing boom. This boom, in turn, is generated by the permissive and unrestrained bank-lending policies, funded by massive foreign borrowings, to finance housing construction.

And such is the demand for workers in this sector, that the last thing on the minds of their small-business employers is how to find easier ways of sacking them.

What follows from this is obvious. Were the community asked specifically to support a measure to circumscribe workers' rights in the way Mr Howard proposes, they would probably say "no".

But the reality is that, quite probably, few workers believe they will be touched by the new laws. And accordingly, those disconcerted Liberal backbenchers - if indeed there are any - will be disinclined to rock the boat. Mr Howard's new policy should slide smoothly through the Senate.

Unfortunately, Mr Beazley is unlikely to be so lucky. If he ever believed his party could develop some political traction from this issue, he must now realise his mistake.

His worker support-base has evaporated. And it is one of the ironies of politics that the very policies which caused these largely Labor-supporting workers to disappear were engineered by the government of which Mr Beazley was an important part. And, even stranger, Mr Beazley continues to be an enthusiastic defender of those same policies.

In strictly political terms then, Mr Howard - whether or not by choice - will have encouraged his political opponent into a manoeuvre which has the capacity to wound Labor.

Longer term, there could be problems for the Coalition. Mr Howard's approach, for reasons already mentioned, almost certainly won't help small business. In fact, that sector could well be harmed by it.

The single workforce, which has already disappeared, has been replaced by a number of other smaller, separate workforces. These comprise workers employed on the basis of considerable and much wanted skills. These workers are much in demand.

The problem is how to attract and keep them. In this day and age, when workers are not encouraged to believe in long-term commitment to a single employer, the only basis for keeping them is to outbid the opposition in terms of higher pay and better conditions. It forces wages up and is maybe not good for the economy overall. But it is what we are doing.

Now there was a time when small business was in many instances associated with the employment of relatively low-skilled workers and it was genuinely affected by laws which made it more difficult and/or costly to dismiss unsatisfactory staff. For reasons already explained, those days may now be largely behind us. Today's situation is very different.

Small business may be even more important than it ever was before, but in order to carry our its role, it must compete with big business for the best workers from within a limited pool of highly skilled workers. And being able to sack its workers more easily won't help.

Given the proposed new laws on dismissal, small business may need to pay a premium in better wages and conditions to attract skilled workers in short supply away from the safer havens of big business.

New policies

What it needs from government are policies which will enable all Australian business to access a better and larger skills base than we now possess. And for that, unfortunately, there are no quick solutions.

Nor are the solutions to be found in the industrial relations area. Among other things. they will require a new approach to education and training - and to planning. We must have policies which help us anticipate skills needs rather than, as we are doing now, waiting until the problem is upon us before trying to do something about it.

If we want to go further, and eat into real unemployment levels, and develop an even wider and more diverse skills base, we must develop an industry policy.